Andres Oppenheimer: Argentina’s hour of truth

Argentina’s President Cristina Fernández de Kirchner still enjoys relatively high popularity rates thanks to an artificially inflated economy, but she may go down in history as one of Argentina’s most disastrous presidents ever.

Fernández, who will start her final weeks in office after Sunday’s presidential elections, has performed an economic miracle in reverse: Despite inheriting the country’s biggest economic bonanza in recent history, thanks to record prices for Argentina’s commodity exports, she will leave Argentina poorer than before.

There is no economist in the world who can dispute this: When she took office in 2007, Argentina’s economy was growing at 8 percent annually, and was one of the most rapidly growing economies in the world.

This year, Argentina’s economy is stagnant at 0.4 percent, and will contract by 0.7 percent in 2016, according to International Monetary Fund (IMF) estimates. Alongside Venezuela and Brazil, it’s Latin America’s worst performing economy.

Be the first to know.

No one covers what is happening in our community better than we do. And with a digital subscription, you'll never miss a local story.

The percentage of Argentines living in poverty has risen from 27.9 percent of the population in 2007 to 28.7 percent in 2014, according to Argentina’s Catholic University’s Social Debt Observatory. The Fernández government stopped releasing poverty figures two years ago.

When it comes to inflation, Argentina changed its way of calculating inflation in 2007. Since then, the government has estimated inflation to run at about 10 percent a year, while international financial institutions and private economists calculate it at 27 percent.

But the saddest fact is that Argentina, which was one of the world’s most advanced and best educated countries early in the 20th century, is now ranking near the bottom of international education, innovation and competitiveness rankings.

Argentina now ranks 59th among the 65 countries from around the world that participated in the PISA standardized test of 15-year-old students. In science and technology, despite the country’s wealth of individual talents, Argentina registered only 81 international patents last year, compared to South Korea’s 18,200, according to the U.S. Office of Patents and Trademarks.

In the World Economic Forum’s 2014-2015 Global Competitiveness ranking of 144 countries, Argentina ranks 104 in overall competitiveness, 138 in protection of property rights, 127 in irregular payments and bribes, 142 in wastefulness of government spending, 143 in favoritism in government decisions, 135 in government transparency, 133 in reliability of police services and 138 in ethical behavior of firms.

And yet, polls show that nearly 40 percent of Argentines are supporting government-backed candidate Daniel Scioli in Sunday’s vote, which could be enough for him to win with a divided opposition.

How can one explain that more than a third of Argentines support the government candidate, despite Argentina’s dramatic involution?

Part of it is because the government is giving cash subsidies to millions of people and has increased the number of public employees by 42 percent, to 1.7 million people. Part of it is because the government controls much of the media, and its propaganda machine has fooled many into thinking that the country has been better off under Fernández.

And part of it is — as Nobel prize winner Mario Vargas Llosa told me two weeks ago — due to Argentina’s “persistence in making mistakes, which seems to be an Argentine vocation.”

My opinion: Whether Scioli wins or loses on Sunday, Argentina is nearing its hour of truth. With an economy deeply in the red, continued capital flight, and simultaneous economic downturns in China and Brazil, Argentina’s biggest export markets, whoever wins the election will have to carry out painful economic adjustments.

By then, Fernández will be out of office, fighting to avoid legal prosecution on massive government corruption charges and possible wrongdoing in cases such as the mysterious death of government prosecutor Alberto Nisman, and hoping to influence the future government through the judiciary, congress and other institutions she now controls.

But when the belt-tightening begins, many Argentines will realize that she has squandered her country’s economic bonanza in a populist fiesta, and that she has been one of her country’s worst presidents in recent memory.